ORANGE COUNTY WATER DISTRICT (OCWD) PREVAILS IN IRVINE RANCH WATER DISTRICT V. OCWD LITIGATION

Summary

Orange County Water District (OCWD) has successfully defended its management of the Orange County Groundwater Basin (Basin) with favorable court rulings on 16 of 17 claims asserted by Irvine Ranch Water District (IRWD) in a three-phase, multi-year lawsuit brought against OCWD.

• In the “Recycled Water” phase of its lawsuit against OCWD, IRWD attempted to re-interpret the rules for management of the Basin, creating a $3M annual cost shift in favor of IRWD -- into perpetuity -- at the expense of a majority of the other 18 water agencies (“Producers”) which are cities and special districts that pump groundwater from the Basin to serve customers throughout north and central Orange County.
   
• In the “Export” phases of the lawsuit, IRWD attempted again to re-interpret the rules for management of the Basin to allow IRWD to export Basin water. This would have provided others a “Free Ride” on decades of investment and good Basin management paid for by the Producers.
   
• In the third phase of the lawsuit, IRWD attempted to claim 4,500 acre-feet of prior water groundwater rights to the Basin. After rulings were made in favor of OCWD in the first two lawsuit phases, IRWD chose to dismiss this claim.

Having won almost every ruling in the lawsuit brought by IRWD, OCWD has protected equity and fairness for groundwater costs and supplies.

About the Orange County Groundwater Basin

Communities located in north and central Orange County have an underground aquifer -- the Orange County Groundwater Basin (Basin) -- to capture and store water. This well-managed water resource reduces Orange County’s dependence on more costly imported water from Northern California and the Colorado River, helping to keep water rates reasonable and ensuring local water supply reliability. Although underground basins are geological and do not respect political boundaries, the 270-square-mile portion of the Basin inside Orange County is operated by the Orange County Water District (OCWD) in cooperation with the Producers that pump groundwater to serve agriculture, businesses, and more than 2.5 million residents in north and central Orange County. As part of its historically wise use and management, OCWD has worked in partnership with the Orange County Sanitation District to create and expand the Groundwater Replenishment System that replenishes the Basin with recycled water treated to potable water standards from its service area.

About OCWD’s Basin Management

Per law, OCWD has the authority to set pricing -- based on costs -- and a Basin Pumping Percentage (BPP), for each of the 19 Producers that pump groundwater from the Basin. For example, if OCWD sets a BPP of 77%, this means that each of the Producers can pump 77% of its potable water needs from the Basin. The BPP ensures good stewardship of the Basin’s groundwater and fairness for the Producers and their customers. Any agency that pumps more than their share (the BPP) must pay a fee, called the Basin Equity Assessment (BEA), to OCWD. Additionally, any agency that pumps more than their Production Limitation (PL), which is 100% of its potable water needs, must pay an additional penalty Surcharge to OCWD.

IRWD vs. OCWD Litigation Background

In June 2015, IRWD filed a lawsuit against OCWD seeking to avoid or reduce its payment of assessments and penalty Surcharges that apply to all Producers. As interested parties -- and to ensure OCWD’s responsible Basin management practices remain equitable and fair -- the City of Anaheim, Golden State Water Company, East Orange County Water District, Mesa Water District, and Yorba Linda Water District joined OCWD in the litigation by filing cross-claims against IRWD. The grounds for the cross-claims was that the relief requested by IRWD would be unfair and create water supply inequities and cost shifts whereby water costs would increase for a majority of the Basin’s water agencies (and their customers) while IRWD’s water costs would decrease.

The trial court rejected 15 of 16 IRWD claims, and upheld the validity of OCWD’s assessments and resolutions attacked by IRWD.

The trial court split IRWD’s claims into three (3) phases for trial. IRWD asserted 17 causes of action of which 16 were tried by the trial court (IRWD dismissed the other cause of action). OCWD and the interested parties prevailed in 15 of the 16 causes that were tried:

• Phase 1 – IRWD claimed that recycled water should be counted, along with potable water, when calculating total water needs for a water agency’s service area. This would have benefitted IRWD in that it would have been able to pump more water and achieve an annual cost savings of approximately $3.3 million; however, this would have been detrimental to the majority of the other 18 Producers in that they would have less water to pump and would have incurred about $3.3 million of increased water costs. On March 26, 2019, the trial court denied all of IRWD’s Phase 1 claims and upheld OCWD’s resolutions establishing the BEA.
   
• Phases 2 and 2a – IRWD claimed it was entitled to export groundwater from the Basin to IRWD’s customers located outside of the Basin. IRWD also challenged OCWD’s PL and Surcharge which are the policy tools used to protect the Basin. If IRWD was allowed to export water, customers outside of the Basin would effectively be subsidized by in-Basin customers. On September 30, 2019, the trial court granted IRWD a declaration that OCWD must seek relief through the legal process to prohibit unlawful exportation of water, but denied any relief on IRWD’s six other export-related claims, thus preserving OCWD’s policies and financial disincentives against exporting groundwater from the Basin. The trial court rejected IRWD’s claim, and held that the PL and Surcharge were validly adopted and not an unconstitutional tax.
   
• Phase 3 – IRWD claimed it was entitled to pump 4,500 acre-feet of groundwater from the Basin pursuant to a 1933 trial court judgment granted to The Irvine Company. IRWD also argued that it can pump and/or export that groundwater from the Basin to serve IRWD’s customers outside of the Basin without complying with the PL or paying the Surcharge.
  
  The trial court dismissed this claim at IRWD’s request. The City of Anaheim (Anaheim), East Orange County Water District (EOCWD), Golden State Water Company (GSWC), Mesa Water District (Mesa Water), and Yorba Linda Water District (YLWD) still had pending cross-claims challenging IRWD’s alleged water rights under the 1933 judgment. IRWD attempted to dismiss as moot the cross-claims of EOCWD, Mesa Water, and YLWD; the Court rejected this argument. Subsequently, IRWD amended its answers to all cross-claims to concede that it does not own or possess any rights under the 1933 judgment and that these rights were abandoned and forfeited due to non-use. On October 4, 2022, the trial court granted relief in favor of Anaheim, EOCWD, Mesa Water, and YLWD judicially declaring that IRWD does not possess water rights under the 1933 judgment. On November 14, 2022, the trial court granted the same declaratory relief to GSWC.
  
  The trial court entered a final judgment regarding all phases of litigation on March 22, 2023.IRWD served a notice of appeal on March 31, 2023 and Golden State served a notice of cross-appeal on May 25, 2023. All parties stipulated on May 25, 2023, that the only issues in IRWD’s appeal will be its contention the court erred with the Phase 1 ruling on recycled water. The Court of Appeal heard argument on the appeals on July 10, 2024. On October 7, 2024, the Court of Appeal issued an opinion affirming the trial court’s judgment in full, and awarding costs to OCWD, EOCWD, Yorba Linda Water District, Mesa Water District, Golden State and Anaheim on IRWD’s appeal.

Recent News 

Local Water Agencies Hail Final Ruling in Irvine Ranch Water District V. Orange County Water District | Mesa Water District Press Release

OC Water agencies praise ruling in Irvine Ranch vs. OC Water District | Smart Water Magazine

Ruling in favor of Orange County Water District prevents unfair pumping from the Orange County Groundwater Basin and protects water customers from higher rates  | California Water News, Maven’s Notebook

Orange county water district wins major legal victory upholding authority over groundwater basin management | OCWD Press Release

Appeals court hands Orange County Water District legal win in dispute over groundwater management | Southern California Record

OCWD wins legal victory upholding authority over groundwater basin management |  Water Education Foundation

OCWD wins legal victory upholding authority over groundwater basin management | Stormwater Solutions

DAILY DIGEST, 10/15: OCWD wins legal victory upholding authority over groundwater basin management | California Water News, Maven’s Notebook

Ruling Summary To Date

Learn more about the Orange County Groundwater Basin